Free cash flow takeaway
A quick read on the company's cash generation and what it means for investors.
Revenue and operating cash flow both increased relative to the prior quarter and the year-ago quarter, yet free cash flow and free cash flow margin declined versus both periods due to a relatively larger increase in capital expenditure and a shift in the composition of operating cash flow. The cash conversion cycle appears stable on a year-over-year basis, but the sequential drop in operating cash flow relative to revenue growth warrants attention.
- Revenue conversion into operating cash flow weakened sequentially despite higher revenue, as operating cash flow grew at a slower pace. The free cash flow margin contracted from the prior quarter due to the combination of higher capital expenditure and proportionally lower operating cash flow.
- Compared with the immediately preceding quarter, revenue improved but free cash flow and its margin were lower. Versus the same quarter one year earlier, revenue and operating cash flow were higher, yet free cash flow and its margin weakened.
FCF snapshot
Quarterly and TTM cash-flow metrics with the minimum valuation context.
TTM free cash flow
$7.3B
Trailing twelve-month free cash flow.
Quarter free cash flow
$1.6B
Free cash flow in the selected fiscal quarter.
Operating cash flow
$1.7B
Cash generated by operations before capital spending.
CapEx
$101.0M
Capital spending and related asset purchases.
FCF margin
34.2%
The share of revenue converted into free cash flow.
Cash flow trend
A short quarterly history shows whether FCF is scaling with revenue or only spiking for one period.
| Period | Revenue | Operating CF | CapEx | FCF | FCF margin |
|---|---|---|---|---|---|
| 2022-06-03 | $4.4B | $2.0B | $126.0M | $1.9B | 43.6% |
| 2022-09-02 | $4.4B | $1.7B | $125.0M | $1.6B | 35.6% |
| 2022-12-02 | $4.5B | $2.3B | $91.0M | $2.2B | 49.4% |
| 2023-03-03 | $4.7B | $1.7B | $101.0M | $1.6B | 34.2% |
Cash conversion quality
Checks that separate high-quality free cash flow from accounting noise or working-capital timing.
| FCF / net income | 127.7% | Shows whether accounting earnings convert into cash. |
| CapEx / revenue | 2.2% | Lower capital intensity usually supports FCF margin. |
| Net cash | $442.0M | Cash and equivalents minus total debt. |
Recent events shaping cash flow
Near-term business events that help explain the free cash flow result.
Operating Cash Flow Efficiency
Revenue increased from both the prior quarter and the year-ago quarter, yet operating cash flow rose only modestly year over year and decreased sequentially. This weaker conversion is the strongest observable force behind the decline in free cash flow and margin.
The weaker operating cash flow conversion drove the free cash flow margin lower despite higher revenue.
What the cash flow says
How to interpret the company's free cash flow beyond the headline number.
Revenue conversion into operating cash flow weakened sequentially despite higher revenue, as operating cash flow grew at a slower pace. The free cash flow margin contracted from the prior quarter due to the combination of higher capital expenditure and proportionally lower operating cash flow.
Compared with the immediately preceding quarter, revenue improved but free cash flow and its margin were lower. Versus the same quarter one year earlier, revenue and operating cash flow were higher, yet free cash flow and its margin weakened.
Monitor the trajectory of operating cash flow relative to revenue, as its sequential divergence from revenue growth is the main factor behind the margin compression.